FinCEN Issues Compliance Guide to Help Small Businesses Report Beneficial Ownership Information - Financial Crimes Enforcement Network. "Starting in 2024, many entities created in or registered to do business in the United States will be required to report information about their beneficial owners—the individuals who ultimately own or control a company—to FinCEN. The Guide is intended to help businesses determine if they are required to report their beneficial ownership information to FinCEN."
From the guide (my emphasis):
The willful failure to report complete or updated beneficial ownership information to FinCEN, or the willful provision of or attempt to provide false or fraudulent beneficial ownership information may result in a civil or criminal penalties, including civil penalties of up to $500 for each day that the violation continues, or criminal penalties including imprisonment for up to two years and/or a fine of up to $10,000. Senior officers of an entity that fails to file a required BOI report may be held accountable for that failure.
Small corporations and LLCs, and taxpayers owning small or inactive entities, are especially likely to stumble into these penalties.
FinCEN Issues Small Biz Guide for Upcoming Beneficial Ownership Compliance - Jay Heflin, Eide Bailly. "The basic impetus behind these reports is to identify 'bad actors' who might be hiding ill-gotten gains in businesses where it is not clear who the owners of the entity are."
But you don't have to be a "bad actor" to hit that $500-per-day fine. You just need to own a small or inactive corporation or LLC and miss a report.
Related: Corporate Transparency Act (CTA) Establishes Reporting Requirements For Companies.
California Companies Defer Billions in Taxes, Interest-Free, as Borrowing Costs Rise - Jennifer Williams-Alvarez and Richard Rubin, Wall Street Journal:
The Internal Revenue Service offers tax relief in the wake of disasters to help individuals and companies recover and to give them more time to gather records that may have been damaged. Hurricane Idalia in Florida and the wildfires in Hawaii, for instance, activated tax deferrals in those areas. For nearly all residents and businesses in California, the IRS delayed the tax deadline for victims of last winter’s severe storms, flooding, landslides and mudslides that have caused fatalities, disrupted thousands of lives and led to billions of dollars in damages. This is pushing quarterly income-tax payments throughout 2023 to mid-October.
In California, that means billions in taxes that companies have been able to put on the back burner, according to corporate disclosures. The relief applies to nearly all the state’s counties for around nine months, an unusually long period, tax experts say. With the concentration of corporate headquarters in the state—67 S&P 500 companies, according to data provider S&P Global Market Intelligence, making it the most popular domicile for the largest U.S. companies—significant benefits are going to some of the most profitable American companies.
The current IRS listing of disaster deadline relief areas may be found here.
IRS to Reduce Audits on Low-Income Credits to Combat Disparities - Erin Slowey, Bloomberg ($):
The IRS will “substantially” decrease audits on refundable tax credits that benefit low-income taxpayers in an effort to reduce racial disparities, the agency said in a letter to Senate Finance Committee Chair Ron Wyden (D-Ore.) Monday.
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To address the disparity, starting in fiscal year 2024, there will be fewer correspondence audits for the Earned Income Tax Credit (EITC), American Opportunity Tax Credit, Health Insurance Premium Tax Credit, and Additional Child Tax Credit, the IRS said.
IRS to Scale Back EITC Audits, Citing Racial Disparities - Jonathan Curry and Cady Stanton, Tax Notes ($):
Nina Olson of the Center for Taxpayer Rights said the changes to the number of correspondence audits on certain credits — including the EITC — are “long overdue” given the small amount that improper EITC payments contribute to the tax gap.
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As for how the IRS might redeploy resources previously directed at EITC correspondence audits — given that the employees can’t be redirected to audits on high-income taxpayers and large businesses — Olson suggested beefing up the IRS phone lines specifically to help taxpayers with questions about refundable credits, and backfilling positions open because of retirement or movement to other roles.
California Lawmakers Send Tax Approval Threshold Amendments to Voters - Paul Jones, Tax Notes ($).
California lawmakers have approved two ballot measures that would ask voters to amend the state constitution to make it easier to raise some local taxes and make it harder for tax watchdogs to create new supermajority thresholds for approving tax increases.
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The measure is aimed in part at countering the Taxpayer Protection and Government Accountability Act (Initiative 21-0042), an initiative constitutional amendment backed by tax watchdog Howard Jarvis Taxpayers Association and the California Business Roundtable. Set for the November 2024 ballot, Initiative 21-0042 would establish stricter requirements for approving taxes, including requiring majority voter approval for state tax increases approved by lawmakers and restoring the traditional requirement for all special taxes — including those put on the ballot via initiative — to pass with a two-thirds majority."
SALT Republicans Search for Unity While Blocking GOP Tax Bill - Samantha Handler, Bloomberg ($):
GOP members of the bipartisan SALT Caucus—dedicated to reinstating the full state-and-local tax deduction that the 2017 tax law capped at $10,000—are blocking their party’s tax bills from full House passage because it does not address the issue.
While that legislation has no chance of passing the Democratic-controlled Senate, the impasse threatens to hold up movement on any bipartisan tax pact that could revive business tax breaks like that both parties support. High-tax state Republicans also see this moment as their chance to make good on campaign promises to raise the SALT limit before facing voters again in 2024.
FTC Warns 5 Tax Prep Firms Against Improper Data Sharing - David van den Berg, Law360 Tax Authority ($). "In a letter sent to the five companies, the FTC said using tracking tools to collect private data from users and sharing the information for advertising is unlawful under the Federal Trade Commission Act. The commission said the five companies were H&R Block Inc., Intuit Inc., TaxAct Inc., TaxSlayer LLC and The Lampo Group LLC, doing business as Ramsey Solutions. The fact that the companies were named did not indicate that they'd done anything wrong, the commission said."
IRS halts ERC claims, warns businesses about scam promoters - Kay Bell, Don't Mess With Taxes. "But, like a lot of tax laws, it's complex. That's led to, as you've probably heard by now, like in my May post Business owners should look carefully at ERC promotions, unscrupulous promoters aggressively marketing ERC claims and filing them for companies that don't qualify."
IRS Pauses Processing of New ERC Claims for the Remainder of 2022, Advises Employers to Be Wary of Aggressive Marketing for Filing Credit Claims - Ed Zollars, Current Federal Tax Developments. "According to the IRS, the delay aims to protect honest small business owners from scams. Additionally, the agency has developed an ERC checklist to assist employers in determining the legitimacy of the claims they are considering filing."
IRS Is Hiring Thousands Of New Workers To Ramp Up Focus On Millionaires And Large Corporations - Kelly Phillips Erb, Forbes. "The annual pay is about $125,000. The average total compensation, including benefits, is approximately $175,000—those benefits include childcare subsidies, parental leave, and opportunities for student loan repayment."
IRS Provides Guidance On Federal Tax Treatment of 2023 State Tax Refunds - Parker Tax Pro Library. "The IRS provided guidance on the federal tax status of refunds of state or local taxes and certain other payments made by state or local governments to individuals."
Of Accounting Methods, Farmland Leases and Farm Program Benefits - Roger McEowen, Agricultural Law and Taxation Blog. "Not understanding the tax nuances of agricultural leases and the tax treatment of ag-related intangibles, as well as the procedures for changing accounting methods ending up costing the petitioner a large sum in tax deficiencies (about $100,000) an I.R.C. §481 adjustment of about $141,000 plus attorney fees."
State-by-state reciprocity agreements - Thomson Reuters Tax & Accounting. "State reciprocity agreements are pacts between two or more states that allow residents to only pay income tax on where they live versus where they work. In other words, if your client travels across a state line to work, they pay income taxes only to their state of residence, if those states have a reciprocal agreement."
A reminder: Eide Bailly offers a full range of state and local tax services. We also regularly round up state-specific tax developments. Check out last week's roundup, State Tax News & Views: Revenues and Romans.
Rapper Tyga Buried Under $8 Million In Tax Debt Keeps Going Deeper - Peter Reilly, Forbes. "The IRS does have robust collection tools beyond just asking, but before it can use them it has to warn you. As noted IRS sent Tyga a notice of intent to levy. That means they will take his stuff, generally money in the bank, or tell people who owe him money that they have to pay the IRS instead of him."
What Happens When the IRS Erroneously Thinks You’re Dead? - Keith Fogg, Tax Notes/Procedurally Taxing. "The death indicator code, like the prisoner code, seems like a great idea for thwarting thieves and no doubt does a good job of stopping them from obtaining some fraudulent refunds; however, the IRS occasionally puts the marker on a not-yet-deceased taxpayer’s account. Doing so prevents the still-living person from obtaining tax refunds to which they are entitled."
Is the U.S. really a global leader in low-carbon industry? - Shuting Pomerleau, Niskanen Center. "A carbon tax would be the most efficient policy for achieving deeper decarbonization and should incorporate a border adjustment to prevent carbon leakage and level the playing field between domestic and foreign producers."
Do American Expats Need Their Own Taxpayer Advocate? - Robert Goulder, Tax Notes ($). Referring to the Taxpayer Advocate Service: "I’m an enthusiastic fan of the TAS. With that in mind, I’ll take this opportunity to respectfully propose one change to the group’s organization: Let’s establish a special operating unit within its structure to focus exclusively on the concerns of nonresident U.S. taxpayers. It would be headed by a separate taxpayer advocate, tasked with monitoring the issues arising from things like the FATCA and FBAR regimes and tax treaty benefits. There’s a considerable list of subject matter this office holder could address. For instance, issues relating to the earned income exclusion of section 911 would fall under the group’s purview."
Related: Eide Bailly Global Mobiity Services.
Hunter Biden Sues IRS for Alleged Breach of His Privacy - C. Ryan Barber, Wall Street Journal:
IRS employees are generally forbidden under the tax code from disclosing information from tax returns, and there are both criminal penalties and potential civil liability for disclosures.
There is a crucial exception. The chairs of the congressional tax-writing committees can request any taxpayer information from the IRS and then the committees can vote to make that information public in a report. The House Ways and Means Committee voted earlier this year to publish transcripts of interviews with the IRS employees in the Hunter Biden case.
When it was under Democratic control, the Ways and Means Committee used the same section of the tax code to publish the tax returns of former President Donald Trump.
Internal Revenue Service Case Advocate Sentenced to One Year Probation for Unauthorized Inspection of Returns or Return Information - TIGTA (defendant name omitted, my emphasis.):
According to the court documents, between on or about April 25, 2014, and on or about August 16, 2019, while she worked as a case advocate within the IRS, Defendant accessed return information for a local tax preparation firm on more than 120 occasions. Two individuals who worked for the tax preparation firm would inquire about returns filed for their clients. Defendant would then access the returns or other return information in the IRS's Integrated Data Retrieval System. The calls received from the two individuals were not part of Defendant’ job responsibilities. Defendant knew that she was not authorized to access the return information in response to these calls, but she nevertheless intentionally accessed the requested return information.
Additionally, between 2016 and 2019, Defendant prepared over 100 tax returns for the tax preparation firm, for which she was compensated... The defendant knew that IRS regulations prohibited her from preparing tax returns for others in return for compensation, gifts, or favor.
It shouldn't take an illegal mole to get that sort of client information out of the IRS in 2023.
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